The President’s Infrastructure Plan: Rebuilding America or Building an Off Ramp?

The Trump Administration’s Fiscal Year (FY) 2018 budget request to Congress contained a six-page fact sheet on the president’s infrastructure plan, offering the most detail we have seen thus far on one of the President’s top three initiatives. The budget proposal raises significant questions about the administration’s commitment to the Federal role in American infrastructure.

As we have heard from Secretary Chao and others in the administration for several months, the infrastructure plan states the commitment to $200 billion direct Federal investment, pieced out in increments over 10 years, funded from cuts to current federal programs. However, the plan does not indicate how the funding would be allocated amongst specific programs. As we have also heard, the plan intends to use the $200 billion to leverage at total of $1 trillion in infrastructure investment from other entities, including States, tribes, local governments and the private sector. It is quite clear that the Administration is viewing the federal government as a minority partner as opposed to the majority investor in infrastructure investment.

Ironically, while touting the importance of infrastructure, the budget proposes to slash some key infrastructure programs. On the list for cuts are transportation programs such as transit new starts, long distance Amtrak service, TIGER discretionary grants and Essential Air Service, among others. Perhaps most alarming of all is the proposed treatment of the Highway Trust Fund, which is projected to be in the red beginning in FY 2021 and will no longer be able to support current levels of funding for highway and transit programs without additional new revenue. Buried in the rarely-read Analytical Perspectives accompanying the budget, is this statement from the Administration: “The fact that the Highway Trust Fund has required $140 billion in General Fund transfers to stay solvent points to the need for a comprehensive reevaluation of the surface transportation funding regime….The Administration believes that the Federal government should incentivize more States and localities to finance their own transportation needs, as they are best equipped to know the right level and mix of infrastructure investments.”

The significance of this statement should not be under-estimated. It essentially reflects a lack of support for continuing major federal surface transportation programs and shifting that burden to States, otherwise known as “Devolution.” Further, the infrastructure plan also contains many provisions related to divesture of current federally-owned assets or allowing a private partner to improve an asset in exchange for revenues associated with the asset. It appears the Administration will be attempting to shift costs associated with current federally-owned assets off the federal balance sheet, and these transactions may well contribute to the pay-fors for the direct Federal investment.

These proposals are sure to provoke controversy on Capitol Hill, particularly among leaders of transportation authorizing committees who are strongly opposed to devolution. Large scale divestiture of Federal assets will also not be embraced by many.

The expansion of tolling is sure to be another controversial touchpoint in the proposal. Congress has historically, with only a few exceptions, prohibited tolling on existing Interstate highways, because those highways have been built with 90 percent Federal dollars. One of the plan’s most significant features is a proposal to allow tolling on Interstate highways. The emphasis on public private partnerships for funding infrastructure also translates generally into more toll roads on the highway side of the equation. Tolling remains publicly unpopular and a very active anti-tolling coalition is already engaged to fight this proposal. Not to mention, many key transportation leaders on the Hill are strong opponents.

The reception of the infrastructure plan by congressional Republicans has been muted. While praising the proposal to shift air traffic control to a non-profit, non-governmental private entity, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) said: “The Committee will continue to review the details, but the president’s budget also reflects the reality of long-term infrastructure funding in America. The country’s leaders in Congress and the White House need to have a real and honest conversation about how to address this fundamental issue and continuing the clear constitutional federal role in infrastructure. All solutions need to be on the table, because simply continuing with the status quo will not produce the infrastructure improvements our Nation needs.” This appears to be an opening salvo that some Hill leaders are prepared to fight the administration on its devolution and divestiture philosophy. On the Democratic side, the reception has been hostile. The plan was called a “sham” by Congressman Pete DeFazio (D-OR), the Ranking Member of the House Transportation and Infrastructure Committee.

The Administration has promised more detail on the infrastructure plan in coming weeks. However, there is already evidence that there may be a slow down on this issue on Capitol Hill. Speaker Ryan, in recent comments, declined to add infrastructure to a list of priorities to address before the end of the year; when prompted, he said infrastructure likely would take a full two years to accomplish. Bottom line, there remains many more details to reveal about where the president’s thinking is on infrastructure as well as much more dialogue between the Administration and Congress before we will see a plan enacted.

A link to our analysis of the infrastructure fact sheet can be found here.

A link to the White House infrastructure fact sheet can be found here.